Hedge Funds Continue Upward Climb, With Event-Driven Funds Leading the Way

As hedge funds post their seventh-consecutive month of positive performance, asset owners are following those numbers with dollars, according to the latest hedge fund performance and asset flow data from eVestment. Hedge funds were up 0.21% in May, pushing year-to-date (YTD) performance up to 3.20%. Investors allocated $10.5 billion to hedge funds in May, bringing YTD totals up to $23.3 billion.

Performance was up broadly across most strategies, but the big surprise is in event-driven funds, where the 10 largest event-driven funds are outperforming all other segments of the industry so far this year. In every other strategy, even where performance is positive, the largest funds are underperforming their peers. Despite this, asset flows into event-driven funds have lagged other categories. “We have been really surprised to see little in the way of meaningful asset flows into event-driven strategies,” says Peter Laurelli, global head of research at eVestment. “Our sense is assets will come back later this year, but that’s obviously not a certainty.”

Macro strategies, on the other hand, have seen the largest funds underperform only to be rewarded with more allocations. Investors put $2.04 billion into Macro funds in May, bringing the YTD total up to $13.79 billion. Returns for macro funds were positive in May, up 0.27% percent and are up 1.28% YTD, however, the largest funds lag behind almost all other segments of the industry this year.

“We are starting to see investors shift assets into macro and out of managed futures funds,” Laurelli explains. “Investors had gone into managed futures as a diversifier, but the performance hasn’t been there. Macro has slightly better performance and can also be uncorrelated.”

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The diversity thesis may also explain why investors are still putting money into commodity funds despite those strategies posting their fourth month of negative performance. Commodities funds were down 1.55% for May and are down 3.20% YTD, but saw $1.3 billion of assets flow into funds in May. Investors have put $3.63 billion into commodity funds YTD.

China funds lead global returns

Emerging markets also posted their fifth-consecutive month of gains, with China-focused funds leading the way. China funds were up 1.60% in May and are up a whopping 11.60% YTD. According to the data, almost 15% of reporting funds focused on China are outperforming the MSCI China benchmark, which is better than developed market funds are doing against their own benchmark.

HSBC’s most recent hedge fund performance report released on Monday also showed strong performance from China-focused funds. Greenwoods Asset Management’s Golden China Fund took the number two slot in the list, up 25.48% through June 9. Quam Asset Management’s China Focus Segregated Portfolio was right behind, ranking fourth and up 23.71% through June 9. Telligent Capital Management’s Greater China Fund also made the top six, returning 20.16% through May 31.

High double-digit performance hasn’t been enough to draw investor dollars for much of this year, however. Asset flows into emerging market funds have been largely flat to negative. But, China funds are starting to show signs of life— the majority of China-focused funds saw positive inflows in May, a trend not seen since 2015.

Tags: eVestment, Hedge Funds, performance

In its annual analysis of all qualifying workplace pension members over the past 10 years, the UK’s Department for Work & Pensions (DWP) found that automatic enrollment has boosted pension participation by more than 50% between 2012 and 2016.

The UK introduced automatic enrollment in 2012 to help reverse a trend in declining private pension saving, and to help normalize long-term savings. It started with the largest employers, with all remaining employers in existence as of April 2012 required to meet their enrolment duties by February 2018. Nearly 8 million workers have been automatically enrolled, and more than 598,000 employers have met their automatic enrollment duties, reports the DWP.

Between 2006 and 2012, there was a general downward trend in workplace pension participation, according to the DWP, from 62% (12 million eligible employees) to a low of 55% (10.7 million). However, since automatic enrollment was adopted in 2012, there has been a sharp increase in pension participants, as the total number of eligible employees participating in a workplace pension soared by more than 5.4 million to 16.2 million in 2016, or 78% of all eligible employees.

Public sector participation rates have remained stable over the past 10 years, according to the DWP, and the largest public-sector increase between 2015 and 2016 (4%) was seen among companies with between five and 49 employees. The highest level of private-sector participation in 2016 was reported in companies with 5,000 or more employees, with 89% of eligible employees participating. After yearly increases since 2012, there was a decrease of 2% in participation rates between 2015 and 2016 among companies with between 250 and 4,999 employees.

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The report also found that the highest participation levels, in both the public and the private sectors, was among those earning more than £40,000 ($51,000) per year. However, it found that public-sector workers earning between £10,000 and £20,000 saw the largest increases in participation since 2012, although the levels of participation among these workers remains lower than for higher earners.

According to the DWP, 77% of eligible employees are continuing to save persistently, which is defined as saving into a workplace pension in at least three years out of a four-year period. The department’s most recent analysis shows that there has been a small decrease in persistency rates between 2015 and 2016, from 79% to 77%. Meanwhile, the proportion of eligible savers not saving persistently was 1% in 2016. For the remaining 22%, there was not enough evidence for the DWP to judge either way.

The total amount saved for eligible employees in both public and private sectors was £87.1 billion in 2016, a rise of 4.6%, or £3.8 billion from 2015. The public sector increased by £1.8 billion, while the private sector grew by £2 billion.

Tags: auto-enrollment, Pension, UK

Auto Enrollment Boosts UK Pension Participation by 50%